The costs of entrenched boards

"This paper investigates empirically how the value of publicly traded firms is overall affected by arrangements protecting management from removal. In a majority of U.S. public companies, staggered boards substantially insulate the board from removal in either a hostile takeover or a proxy contest. We find that staggered boards are associated with a lower firm value (as measured by Tobin's Q). We also find evidence consistent with the possibility that staggered boards bring about, and not merely reflect, an economically significant reduction in firm value. Finally, the correlation with reduced firm value is stronger for staggered boards that are established in the corporate charter (which shareholders cannot amend) than for staggered boards established in the company's bylaws (which can be amended byshareholders)"--John M. Olin Center for Law, Economics, and Business web site.